Wednesday, June 21, 2006

Career Breaker

The Gov could just as easily contract out operations and management, but keep the tolls for itself.

To which the FLUBA Committee on the Obvious responds; that the $3.85 billion the state will receive from Cintra-Macquarie this week, are (twice the projected net) tolls. That the lease is a contract, and, that the same consortium will operate and manage the road.

From that position, head engineer pgl has been busy excavating the position further. The latest being:

...the state could also run the toll roads more efficiently with technology. But isn’t it evident that there has been a huge efficiency gain when the private firms can offer double the state’s reservation price as established by the Crowe Chisek discounted cash flow model? ....The alleged efficiency gain would have to come from Cintra and Macquarie being able to run the toll roads not only more cheaply than the government but also more cheaply than the other bidders if this were a truly competitive auction.

The emphasis in the above not only being the FLUBA's, but also it's point--made several times in the comments sections attached to pgl's posts--and we're delighted it finally penetrated.

Not that it had any effect on the quality of his analysis. As he later explains it away as graft:

...maybe the other 10 bidders refused to pay enough to the Governor under the table as he was so happy to claim $3.8 billion was better than his reservation price - a reservation price concocted by citing a really sloppy analysis.

Which would further extend the investors' break-even point beyond the $ 8.25 billion--in addition to the $3.85 lease payment, they've committed to $4.4 billion in maintenance expenses--and make it even less likely they'll profit from this deal.

Not to mention it is a casual slander of Governor Daniels, the successful bidder, and the Goldman Sach advisers the state hired to vet this.

No mind, personal slights will be overlooked when there's money to be made. And, according to pgl, there's plenty of that left on the table:

So the Governor – aided by what appears to be a faulty Crowe Chisek analysis are selling assets that may be worth $5 billion to private investors for only $3.8 billion. ...one might wonder of the Governor asked them to lowball the reservation price. In other words, is this some form of financial fraud imposed upon the taxpayers? Why would any responsible Governor be engaged in this kind of behavior? Oh but – we are talking about George W. Bush’s first OMB director.

The FLUBA Committee on Economists Who Insist on Flying Under Low Hangers, asks (given that the Ohio Turnpike is undoubtedly next in line, unless Texas or New Jersey beats them to the punch), when will Sawicky, pgl & Assoc. be entering the lists?

I.e., if you're so smart, why don't you make yourselves rich by getting in on the deal? Thar's gold in them thar tolls, you sez.